Trade and food price volatility in Africa
Presentation Type
Oral Presentation
Keywords
food price volatility, trade volume, price hike, Africa
Department
Economics
Major
Political Science, Economics
Abstract
Africans who spend an average of 25 to 50 percent of their income on food are disproportionately affected by changes in food prices. The food price hikes of 2007-08 were one such period that generated greater unpredictability for poor families to plan their daily expenditures. In this paper, we examine whether volume of traded agricultural products may affect food price volatility in Africa. We hypothesize that a greater volume of crops traded leads to greater supply of close substitutes, thus resulting in lower food price volatility. Trade volume is analyzed at 2 levels: the international and country levels. At the international level, we find weak evidence for this theory, and for all crops except rice, lower food price volatility correlates with lower, not higher trade volume. At the country level, the relationship between trade volume and volatility is as predicted by the hypothesis, but is only statistically significant for rice. Future research may seek to test the reverse of this hypothesized relationship using lagged trade volume as affected by price volatility.
Faculty Mentor
Michael Olabisi
Funding Source or Research Program
Academic Year Undergraduate Research Initiative
Presentation Session
Session C
Location
Plaza Classroom 188
Start Date
24-3-2017 5:15 PM
End Date
24-3-2017 5:30 PM
Trade and food price volatility in Africa
Plaza Classroom 188
Africans who spend an average of 25 to 50 percent of their income on food are disproportionately affected by changes in food prices. The food price hikes of 2007-08 were one such period that generated greater unpredictability for poor families to plan their daily expenditures. In this paper, we examine whether volume of traded agricultural products may affect food price volatility in Africa. We hypothesize that a greater volume of crops traded leads to greater supply of close substitutes, thus resulting in lower food price volatility. Trade volume is analyzed at 2 levels: the international and country levels. At the international level, we find weak evidence for this theory, and for all crops except rice, lower food price volatility correlates with lower, not higher trade volume. At the country level, the relationship between trade volume and volatility is as predicted by the hypothesis, but is only statistically significant for rice. Future research may seek to test the reverse of this hypothesized relationship using lagged trade volume as affected by price volatility.